Study shows Canada agreed to pay too much for common generic drugs

Canada’s strategy to pay less for generic drugs has proven ineffective through a new study published in Open Medicine. A countrywide purchasing plan, agreed to by nine of the provinces in April, 2013, has done nothing more than ensure Canada pays more than double what they could (and should) be paying for the drugs.

Under the “highly unusual” purchasing plan, the generic drugs include amlodipine, atorvastatin, omeprazole, rabeprazole, ramipril and venlafaxine, medication used to treat depression, hypertension and other diseases.

The Open Medicine study showed that when compared to the drug plans of other countries – New Zealand, the US, UK, Sweden and Germany – Canada paid substantially more, resulting in a loss of billions of taxpayer dollars.

“As an aggregate assessment, these data show that across all medicines and strengths, Canadian prices exceeded those of the foreign comparators by a median price ratio of 2.13,” reads the study. “In other words, even after the Council (of the Federation)’s decision, Canadian prices for these generic medicines were more than double those of peer countries.”

Amir Attaran, professor at the University of Ottawa and co-author of the study of how much countries pay for generic drugs, says that Canada pays too much and refers to it as “uniquely Canadian stupidity,” because, “No one else does it this stupid way.”

Attaran explains, “What they do is negotiate prices with competing companies or they put it to tender — where the government announces how much medicine they want to buy and companies bid to supply it.” He adds that together, the provinces have the economic clout to demand much lower prices from the drug companies.

While Canada’s premiers estimated their 18 percent threshold – over the cost of the drugs – would save the country about $100 million, Attaran explains the threshold they chose was completely arbitrary and “what the premiers have done is anything but competition. It’s quite the opposite. It’s setting an arbitrary price, a percentage of the full price.”

“They chose 18 per cent because they thought if you were paying that, you’d probably be paying what other countries pay,” he adds.

Although Canada has saved money on the drugs, that happened during 2013. Now, the country is stuck with their agreement of setting generic drug prices at a percentage of the name-brand drugs, resulting in excessive prices.

Instead, Canada should have followed other examples, such as New Zealand, that uses a competitive tender system for drug companies that want to sell to the public health system. This type of tendering results in much lower drug prices.

Apparently the provinces had considered this option but were unable to agree on an alliance for bulk purchasing. “You would think with all that political muscle working together, they would get it right,” said Attaran. “Meaning what’s happened here is not the case of an isolated province making an isolated mistake, it’s everyone working together and coming up with a stupid mistake.”

Attaran says now, “What can happen is the premiers can go back to their original plan — a pooling of all the drug plans and negotiate with that additional buying power, so that whatever generic supplier can offer the best deal.”